Consequences of liquidating
Company management, however, was blissfully unaware of this development and continued to file the business’s federal corporate income tax return and pay all federal income taxes.Eventually, company officers learned of their plight and reincorporated the business in the same state.However, in some cases, complete liquidation need not be accompanied by a formal or legal dissolution of the corporation. Complete liquidation When a corporation is completely liquidated, it transfers all of its assets to its shareholders—whether the assets are cash or property—and the shareholders assume the corporation’s remaining liabilities. According to Section 1.332-2(c) of the tax code, “…legal dissolution is not required…” What’s more, a related revenue rule (Rev. Accordingly, the continuation of existence, after dissolution, may well depend on whether the governing state law provides that a dissolved corporation can still own assets.
For example, if you are applying for a credit card or a personal loan from a Bank then it is unlikely to be noticed or become an issue.ASIC is able to disqualify a person from managing a corporation for up to five years if the person has been an officer of two or more companies that have entered liquidation within the previous seven years. Whereas ASIC looks for “blood”, being offences, a liquidator looks for “money”.Before doing so, ASIC will consider a few things: As there were only 32 prosecutions in the six month period, it’s clear that ASIC just doesn’t have the resources to disqualify every director that could be disqualified. That is, a liquidator will usually only take an action against a director if there is likely to be a monetary return.It can be recognized only after the corporation has made its final distribution, or at least its last substantial distribution. Contributor Robert Willens, founder and principle of Robert Willens LLC, writes a regular tax column for The last substantial distribution can be used only if, at that time, the amount of the final distribution is both de minimis and determinable with “reasonable certainty.” (See in this regard Rev. Footnotes *Except in instances where the liquidation is governed by Section 332(a), and Section 337(a).